NEW DELHI: Banking stocks including Axis Bank, ICICI BankBSE -1.86 %, State Bank of
India, HDFC BankBSE -2.54 % and most of the
PSU banks slipped over 1 per cent weighed down by a weak rupee which further bleaks the outlook on rate cut hopes by the RBI.
The rupee fell to a record low today forcing the central bank to come to its defense, while bond yields surged. The rupee slipped to an all-time low of 61.21 and is Asia's worst performing currency.
At 01:00 p.m.; the BSE Banking index was trading 1.3 per cent lower, led by losses in ICICI Bank, which was down 2.4 per cent followed by Axis Bank, which slipped 2.2 per cent to Rs 1256.50 and Kotak Mahindra BankBSE 0.00 % was trading 1.2 per cent lower at Rs 692.75.
State bank of IndiaBSE -0.80 % was down 1.09 per cent, while Bank of Baroda BSE 1.23 % plunged 1.2 per cent and Canara BankBSE 5.19 % was down 1.06 per cent to Rs 346.
The rupee was trading at 61.06/07 at 12:00 p.m., breaching the previous record low of 60.76 on June 26, Reuters reported. Earlier on Monday, it had hit an all-time low of 61.21.
It had closed at 60.225/235 on Friday. "Higher CAD coupled with depreciating rupee owing to continue dollar outflow and rising crude price raised concern of high inflation which RBI will closely watch in its July 30th monetary review," said Sanjeev Jain, Research Analyst- BFSI at Microsec Capital Ltd.
"We believe the risk of high inflation will provoke the RBI not to touch the key rates this time and maintain status quo stance," he added.
Overseas investors have pulled out more than Rs 4,500 crore (about $754 million) from the Indian debt market in the first week of this month amid concerns over depreciating rupee, PTI reported.
Banking stocks and especially the Public Sector Banks (PSBs) have been under pressure ober the past few months owing to deterioration in asset quality, subdued business growth coupled with weak economic condition.
Going forward, Jain of Microsec Capital is of the view that there may be a pressure on the banking stocks specially PSBs owing to the following factors such as weak rupee, RBI's hawkish stance on rate cuts, slow economic growth and debt restructuring.
Most analysts are of the view that PSBs may report healthy profit in Q1FY13 result supported by higher treasury gain due to significant fall in bond yields but there may be pressure on margin as asset quality may remain under pressure due to weak economic growth.
Depreciating Rupee has provoked the RBI to increase the provisioning and capital requirements for bank exposures to corporates which have unhedged foreign currency exposures.
The move is expected to affect the bottom line of the Indian banks. Neeraj Gambhir, MD & Head, Fixed Income India, Nomura Capital is of the view that we could potentially have some kind of liquidity squeeze if RBI doesn't intervene.
"I do not expect that to happen right now. So the market has just given up on any hopes for future rate cuts or substantial change in the directionality of monetary policy," he added.
indiatimes.com
The rupee fell to a record low today forcing the central bank to come to its defense, while bond yields surged. The rupee slipped to an all-time low of 61.21 and is Asia's worst performing currency.
At 01:00 p.m.; the BSE Banking index was trading 1.3 per cent lower, led by losses in ICICI Bank, which was down 2.4 per cent followed by Axis Bank, which slipped 2.2 per cent to Rs 1256.50 and Kotak Mahindra BankBSE 0.00 % was trading 1.2 per cent lower at Rs 692.75.
State bank of IndiaBSE -0.80 % was down 1.09 per cent, while Bank of Baroda BSE 1.23 % plunged 1.2 per cent and Canara BankBSE 5.19 % was down 1.06 per cent to Rs 346.
The rupee was trading at 61.06/07 at 12:00 p.m., breaching the previous record low of 60.76 on June 26, Reuters reported. Earlier on Monday, it had hit an all-time low of 61.21.
It had closed at 60.225/235 on Friday. "Higher CAD coupled with depreciating rupee owing to continue dollar outflow and rising crude price raised concern of high inflation which RBI will closely watch in its July 30th monetary review," said Sanjeev Jain, Research Analyst- BFSI at Microsec Capital Ltd.
"We believe the risk of high inflation will provoke the RBI not to touch the key rates this time and maintain status quo stance," he added.
Overseas investors have pulled out more than Rs 4,500 crore (about $754 million) from the Indian debt market in the first week of this month amid concerns over depreciating rupee, PTI reported.
Banking stocks and especially the Public Sector Banks (PSBs) have been under pressure ober the past few months owing to deterioration in asset quality, subdued business growth coupled with weak economic condition.
Going forward, Jain of Microsec Capital is of the view that there may be a pressure on the banking stocks specially PSBs owing to the following factors such as weak rupee, RBI's hawkish stance on rate cuts, slow economic growth and debt restructuring.
Most analysts are of the view that PSBs may report healthy profit in Q1FY13 result supported by higher treasury gain due to significant fall in bond yields but there may be pressure on margin as asset quality may remain under pressure due to weak economic growth.
Depreciating Rupee has provoked the RBI to increase the provisioning and capital requirements for bank exposures to corporates which have unhedged foreign currency exposures.
The move is expected to affect the bottom line of the Indian banks. Neeraj Gambhir, MD & Head, Fixed Income India, Nomura Capital is of the view that we could potentially have some kind of liquidity squeeze if RBI doesn't intervene.
"I do not expect that to happen right now. So the market has just given up on any hopes for future rate cuts or substantial change in the directionality of monetary policy," he added.
indiatimes.com
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